Key Morningstar Metrics for Franklin Brandywine U.S. High Yield Fund
- : SilverMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : AverageParent Pillar
BrandywineGlobal High Yield faces more questions than it once did, but the team’s distinct, bargain-hunting approach continues to set it apart favorably.
In addition to the US-domiciled BrandywineGlobal High Yield mutual fund, this analysis applies to Canada-domiciled Franklin Brandywine U.S. High Yield (aside from currency differences, the two vehicles have been managed in tandem since September 2024).
The abrupt July 2025 exit of former comanager John McClain triggered team-related questions. McClain left the firm to pursue a position with a greater remit at Goldman Sachs, a move that marked the end of a highly productive 10-plus-year partnership with comanager Bill Zox. Critically, Zox remains in place on this fund and sibling strategy BrandywineGlobal Corporate Credit; his presence has been constant throughout. Zox joined predecessor firm Diamond Hill in 2001, has managed this strategy since its January 2016 inception, and has comanaged BrandywineGlobal Corporate Credit since 2006. That continuity is encouraging, but it can introduce key-person risk, particularly with smaller teams like this one. Surrounding Zox is a familiar but relatively junior supporting cast of four investors. That includes comanager Jack Parker, who was named to this strategy in 2023 and has worked with Zox since 2018; Parker has spent the first decade of his career working at Brandywine/Diamond Hill.
Zox and company go against the grain in more ways than one. The value focus that Zox has helped hone over the years means there is less of a need for a large bench of leveraged-finance specialists that is typical of other high-yield managers. Instead, the team builds concentrated, high-conviction positions in high-coupon structures it deems as having defensive characteristics. The team is then very active in its trading (this strategy is consistently one of the highest-turnover strategies in the high-yield bond Morningstar Category) with the goal of exploiting forced sellers and price takers to earn steady, durable trade alpha.
That approach has yielded excellent results since the strategy’s inception. A portion of that success has, unsurprisingly, come from relatively strong performance during stressed credit environments when liquidity comes under pressure, like during 2018’s fourth-quarter high-yield selloff and 2020’s first-quarter pandemic panic. In both instances, the strategy outperformed more than 80% of its distinct competitors.
That’s what makes its recent underperformance when high-yield credit spreads widened leading up to the April 2025 US tariff selloff disappointing; the US mutual fund’s institutional shares’ 1.85% loss between Nov. 15, 2024, and April 7, 2025, trailed more than two-thirds of category peers. A handful of isolated credit issues have subsequently weighed on the strategy’s performance—exacerbated in part by the team’s aggressive position sizing—indicative of the risk associated with running concentrated credit portfolios. These factors have led the strategy to be among the worst-performing in its category since the start of 2025. Despite the extended stretch of uncharacteristic underperformance, however, the strategy continues to rank among the very best by any absolute or risk-adjusted performance metric versus distinct high-yield peers from its January 2016 inception through June 2026. So long as the managers don’t deviate from their against-the-grain approach, this continues to be a strong choice for a high-yield allocation.
Franklin Brandywine U.S. High Yield Fund: Performance Highlights
This strategy’s long-term record is still excellent despite poor recent results.
Named on the fund since its January 2016 inception, comanager Bill Zox shares most of that record with former manager John McClain, who left the firm in July 2025. The since-inception record also predates Brandywine’s August 2021 acquisition of this team and mutual fund. The US-domiciled fund’s institutional shares’ 7.56% annualized return through June 2026 outpaced the ICE Bank of America US High Yield Index’s 6.32% gain and edged all but three of its distinct high-yield peers. The managers accomplished this largely because of their ability to generate outperformance during rocky credit markets while still adding value through strong credit selection during up markets. The strategy’s volatility-adjusted performance (as measured by Sharpe ratio) also ranked fourth out of 142 distinct peers during that same period, indicative of a topnotch risk/reward trade-off.
The fund has produced notable recent results, both good and bad. Its top-decile finish in 2023 was impressive given the team’s decision to underweight debt rated CCC during a year in which lower-rated corporate debt outperformed significantly. Meanwhile, macro headwinds combined with a handful of credit missteps have spelled trouble for the strategy more recently. It uncharacteristically lagged more than two-thirds of peers when high-yield credit spreads widened by 189 basis points between Nov. 15, 2024, and April 7, 2025. As spreads subsequently tightened and approached all-time tight levels, the portfolio’s exposure to a handful of issuers that entered into liability management exercises weighed on performance. The fund’s 7.63% gain between April 8, 2025, and July 7, 2026, was worse than more than 90% of rivals.
The team’s ability to navigate credit landmines should be a watchpoint, but it will be even more important to evaluate the strategy’s performance during future spread-widening periods, given that these are the markets where Zox and company have earned their keep over the years.
